Accounting or accountancy is an area of accounting that primarily deals with the measurement, preparation, reporting, and communication of data about various non-financial economic entities including corporations and businesses. It mainly uses financial transactions to identify the financial performance of a company or an entity in terms of cash flows, assets, liabilities, and net worth. The basic job of an accountant is to determine the financial reporting data needed by other people involved in the business such as investors, banks, and other stakeholders. Thus accounting provides crucial information on the financial health of a company.
Accounting involves the systematic recognition, measurement, reporting, and interpretation of financial transactions that result in the measurement of the performance of a company or entity. The process of accounting involves three primary stages namely planning, analysis, and control. While planning is concerned with how the activities of the planner and other involved parties inside the organization will function, the analysis stage refers to how the results of the analysis will be used for planning purposes. Finally, control involves the monitoring and evaluation of the activities of the planner, the other involved parties, and the performance of the company or entity.
The main activities included in the accounting process are the preparation of balance sheets, identification of the financial instruments owned by the firm, the recording of financial transactions, collection of information regarding the assets, liabilities, and ownership interest of the firm, the preparation of the year end results, the review of the year end results, and the preparation of reports. The accounting process is usually reported in four formats namely the journals of account, journals of income, journals of sales, and journals of temporary history. Normally the accountant prepares the year end accounts on the last day of the fiscal year.
In general the responsibilities of an accountant includes the preparation of financial statements which provides the details of the business transactions of a company. Together with the financial statements, the accountant also prepares reports about the performance of the company and provides advice concerning the issues that need urgent attention. The reports and advice are provided to the management and are designed to assist them in the decision making process. Generally speaking, the accountant plays an important role in the determination of the financial status and future prospects of the firm. Some of the areas where the accountants perform their important role are the following:
In order to become an accountant it is not mandatory that you have a degree in accounting. However, having a degree in accounting gives you more credibility and enhances your marketability in the market. In United States today there are many colleges and universities that offer accounting and finance related courses. Generally when you register for any course in accounting you will find that you learn about the basic accounting functions. You will also learn about the principles and the techniques involved in the financial accounting processes.
Another major area of accounting is known as cost accounting. Cost accounting is related to the management of material, labor, resources, and money. In cost accounting an accountant measures the price variations of a business or a company’s output against the price variations that would occur if the company did not make any change in the output of the business. Basically, cost accounting is essential for a firm to determine the costs associated with making the business decisions. Generally, accountants are required to have a background in commerce, economics, law, information systems, health, engineering, marketing, supply chain management, and other similar fields.